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44 per cent of Canadians are off track about how much money to set aside for home ownership

- Mortgage Intelligence survey reveals that many Canadians allocate too
little or too much money for housing costs compared with mortgage
lending standards -
TORONTO, Dec. 3 /CNW/ - When asked what percentage of gross household
income a homeowner should set aside for housing costs, 44 per cent of
Canadians select amounts deemed to be too high or too low based on mortgage
lending standards, according to a new Angus Reid survey. The survey,
commissioned by Mortgage Intelligence, a leading Canadian residential mortgage
brokerage, was designed to determine how closely Canadians' perceptions of
housing affordability are aligned with Gross Debt Service (GDS) ratio
guidelines.
The GDS ratio is a popular measure for lenders to evaluate the financial
condition of borrowers. According to general mortgage lending standards, a GDS
ratio for monthly housing costs - which includes mortgage principal and
interest payments, property taxes and heating expenses - should not exceed 32
per cent of gross household income at the high end. Of those surveyed, 47 per
cent correctly selected a range of 20 to 32 per cent of gross income for
housing costs.
About 27 per cent of respondents underestimated the amount of gross
income a homeowner should set aside for housing expenses, estimating 20 per
cent of gross income or lower. On the flip side, 17 per cent of respondents
overestimated, stating that 41 per cent or more is enough to cover housing
expenses.
"Canadians whose monthly housing expenses exceed a maximum GDS ratio of
32 per cent risk overextending themselves and could face challenges in meeting
their mortgage obligations, while those who underestimate housing costs may be
taken aback by the reality of rising housing costs in Canada" said John
Schipper, President of Mortgage Intelligence. "It's important that homebuyers
properly evaluate their current financial situation and seek proper guidance
about what they can truly afford."
In addition to the GDS, another important financial measure for home
affordability is the Total Debt Service (TDS) ratio. In addition to housing
costs, this ratio also takes into account debt payments on bank loans, car
loans, credit cards and other regular commitments, including alimony or child
support. Typically, lenders require that a borrower's TDS ratio not exceed 40
percent of his or her monthly gross income.
"Online tools, such as mortgage calculators, are a good starting point
for homebuyers to determine appropriate housing budgets, but they shouldn't
stop there," added Schipper. "A one-on-one consultation with a mortgage
professional will help borrowers define a plan that ties home ownership dreams
to personal and financial goals."
Some interesting provincial distinctions were also apparent in the survey
findings. In Atlantic Canada, 38 per cent of respondents set aside up to 20
per cent of their gross income for housing, while in the Prairies 30 per cent
of respondents state that 41 per cent or more of gross income is an
appropriate allocation.
Mortgage Intelligence has more than 1,000 independent consultants and
associates in offices across Canada. To identify a consultant, homebuyers can
call 1-877-667-5483.
Survey results
What percentage of gross income should a homeowner set aside for housing
costs? Please include mortgage principal and interest, taxes, and heating
expenses when thinking about housing costs.
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Responses Total Region Age
BC AB MS/SK ON PQ ATL 18-34 35-54 55+
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Up to 15% 16% 18% 14% 13% 13% 16% 26% 23% 15% 8%
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16%-20% 11% 6% 12% 10% 13% 11% 12% 11% 10% 13%
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21%-25% 17% 13% 16% 12% 11% 30% 16% 18% 16% 19%
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26%-30% 20% 19% 24% 19% 24% 17% 15% 12% 24% 24%
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31%-35% 9% 10% 6% 11% 10% 8% 12% 9% 8% 13%
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36%-40% 9% 17% 10% 6% 8% 7% 4% 7% 9% 10%
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41%-50% 11% 10% 14% 19% 13% 5% 11% 12% 13% 6%
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51% + 6% 8% 5% 11% 6% 6% 3% 8% 5% 6%
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About the survey
This online survey was conducted with 1,114 Canadians ages 18 years and
older from November 19 to 20, 2007. The survey was conducted through Angus
Reid Strategies on behalf of Mortgage Intelligence Inc. Results can be
considered accurate to within plus or minus 2.94 percentage points, 19 times
out of 20. The results have been statistically weighted according to
Statistics Canada's most current education, age, gender, and region Census
data to ensure a representative sample of the entire adult population of
Canada. Discrepancies in or between totals are due to rounding.
About Mortgage Intelligence Inc.
Mortgage Intelligence Inc. is among the largest and fastest growing
mortgage brokers in Canada. Mortgage Intelligence consultants help clients
make well-informed mortgage decisions for their home, revenue or vacation
properties, renewals, home renovations, debt consolidation needs, and
specialized mortgage requirements. The company had funded volumes in excess of
$7.8 billion in fiscal year 2006. For more information, visit:
www.mortgageintelligence.ca.